EP Plenary session - A new trade instrument to ban products made by forced labour. 09/06/2022. Source: EP

Brussels is pushing for ban on forced labour products

Editor’s Note: Washington’s import ban on Made in Xinjiang sparks outrage in China while Brussels rushes to make its own version of a ban on forced labour products. On the other hand, the red carpet is rolling for the China-EU high-level talks in the weeks to come. This edition of the CCCEU Weekly Update keeps you informed of the China-EU dynamics. Enjoy reading and have a lovely weekend.

This week, we'll be looking at the legislative progress of the EU's version of the forced labour product ban, as well as recent interactions between China and the EU.

First, the ban on Xinjiang-related products. The "Uyghur Forced Labor Prevention Act" came into force on June 22. It assumes that any product, either partly or wholly, made in China's Xinjiang Uygur autonomous region is linked to forced labor. As such, at the risk of facing a $250,000 fine, both U.S. and non-U.S. importers must prevent Xinjiang-related products from entering the US.

A Chinese Foreign Ministry spokesperson said Tuesday that China strongly condemns and firmly opposes the Act.

Brussels is speeding up its development of its forced labour product ban, even bypassing the impact assessment typically provided in EU legislation, while also broadening and improving the scope and level of responsible officials. A legislative initiative is planned for after the summer break.

On June 9, Dubravka Šuica,vice president of the European Commission, spoke about the legislation's progress during a debate in the European Parliament on "A new trade instrument to ban products made by forced labour."

Here are excerpts from her speech:

Forced labour exists on every continent, including Europe, and is frequently found early in supply chains.

The European Commission Executive Vice-President and Trade Commissioner Dombrovskis and EU Internal Market Commissioner Breton will jointly lead the file. All relevant departments of the European Commission and the European External Action Service will be associated. European Commission Executive Vice-President Vestager will also be involved.

The legislative initiative "requires urgent action" and does not allow the Commission to prepare an impact assessment, which will then publish a working paper. Previously, the European Commission solicited legislative evidence on May 23 for public feedback. In addition, the European Commission is currently consulting with EU and international stakeholders.

The legislative initiative will build on guidelines set out in President von der Leyen's State of the Union address last September and the European Commission's "Communication on Decent Work Worldwide". The legislative proposal aims to effectively prohibit the placing on the EU market of products manufactured by forced labour and will cover both EU domestic and imported products.

The legislative proposal should recognize the role of due diligence in identifying, preventing, mitigating and accounting for the use of forced labor in value chains. It should be coherent with the due diligence obligations established in existing initiatives. It may be useful to give guidelines to companies to help them carry out various steps of due diligence. This should be in line with those guidelines to be developed in the framework of the proposal for a directive on corporate sustainability due diligence. Such guidelines should be tailored for different types of economic operators, especially those not covered by the above-mentioned proposal.

At the international level, the EU is working with partners including the US and Canada, as well as international organisations. The initiative should consider ways to cooperate with third countries, including countries where supply chains originate.

From May 23rd to June 20th, the European Commission solicited feedback on the forced labour product ban from the public. So far, 107 articles have been received , mainly from EU business associations, enterprises, and non-governmental organizations.

The feedback from "SolarPower Europe" is very representative.

The association suggested that the new legislation should have a commensurate approach to enforcement: “Due to the vast variety of materials with different origins used to produce PV products, it is a challenging task for the EU solar industry as well as for the authorities to trace the supply chains for all the used inputs.”

“To reduce the overall administrative burden and ensure that the actual human rights violations are detected early on, the European Commission may also refer to existing auditing systems and consider to exempt companies from further inspections if they can prove by corresponding certificates, participation in industry-driven initiatives or existing supplier management systems that the suppliers they are using are compliant with relevant norms and standards.”

It also suggests “keeping import requirements manageable."

 “Today the majority of the PV products is produced in China and Southeast Asia e.g., 68% of silicon metal, 63% of polysilicon, over 95% of ingots and wafers, 79% of cells and 71% of solar panels are produced in China,” it said.

“Beyond the fundamental need of having to accelerate the efforts to re-develop a PV manufacturing base in the EU, the EU also has to ensure that the import process is not overloaded with a lot of additional bureaucracy and red-tape for the companies involved,” it noted, calling for an “easy system providing a standardized set of documents needed for PV products under review.”

The commission will have two months to work on the proposal, which has the potential to undermine China-EU relations.

 At the moment, the two sides are preparing for high-level talks and visits.

On Twitter, Wang Lutong, director-general of the department of European affairs of China’s Foreign Ministry, said that more dialogue is needed between China and the EU. "In the coming weeks, high-level dialogues will take place to discuss green development, climate change, the digital economy, innovation, and public health."

It is echoed by the EU side. According to Bloomberg, the EU ambassador to China, Nicolas Chapuis, said that the EU and China are planning two high-level meetings in the coming weeks. According to Politico, the EU-China high-level dialogue on green economy will take place on July 7.

 In addition, Mr. Wu Hongbo, the Chinese government's special representative for European affairs, recently visited Germany and Italy.

Farewell to Ambassador Nicolas, who is leaving his post. On June 17, he met with Chinese Minister of Ecology and Environment Huang Runqiu via video conference.

The next EU ambassador to China and current Spanish Ambassador to Japan, Jorge Toledo Albiñana, appears to be in Europe. Reinhard Bütikofer, the head of the European Parliament's delegation for relations with China, tweeted on June 22 that the two had met.

Europe ramps up response to gas shortage risks

According to Economic Information Daily, the supply of natural gas from Russia to Europe has been reduced due to the crisis in Ukraine. Facing the shortage of natural gas, the governments of Germany, Italy and the Netherlands have recently announced countermeasures, including encouraging the reduction of industrial gas usage and temporarily lifting restrictions on coal-fired power generation.

According to Reuters, Germany, which relies on Russia for 55% of its gas needs, has entered Phase 2 of its three-stage emergency gas plan but is not yet triggering a clause that lets utilities pass on soaring gas costs to customers, the Economy Ministry said.

Italy, which gets around 40% of its gas needs from Russia, announced initial measures to boost gas storage this week and plans to maximise the use of coal-fired power plants if needed to save gas.

The Netherlands will activate the early warning phase of its energy crisis plan and lift a cap on production by coal-fired power plants. It imports 15% of its gas from Russia. 

China's absorption of foreign capital to maintain a stable trend

According to Economic Daily, the latest data released shows that from January to May 2022, the actual amount of foreign investment used nationwide was 564.2 billion yuan, up 17.3% year-on-year, equivalent to US$87.77 billion, up 22.6% year-on-year. The first five months of China's foreign investment absorption has maintained a steady growth, which fully illustrates that China still has a strong comprehensive comparative advantage in infrastructure, human resources, industrial support, etc., and the market attractiveness is undiminished.

Several experts said that in the context of the domestic epidemic and the slowdown in global economic growth, the Chinese market remains attractive to foreign investment, China is also focused on expanding the high level of opening up, and continue to launch important initiatives to actively and effectively use foreign investment, and create a better business environment for the development of foreign enterprises in China.

EU: No intention to blockade Kaliningrad

The EU foreign affairs chief Borrell said that the EU does not want to block or prevent the traffic between Russia and Kaliningrad, according to a press release issued by the EEAS.

Annual inflation up to 8.1% in the euro area

The euro area annual inflation rate was 8.1% in May 2022, up from 7.4% in April. A year earlier, the rate was 2.0%. European Union annual inflation was 8.8% in May 2022, up from 8.1% in April. A year earlier, the rate was 2.3%. These figures are published by Eurostat, the statistical office of the European Union.

The China-Europe Railway Express (Chongqing) embarks on its 10,000th trip

According to Xinhua, The cargo train, fully loaded with electronic products, mechanical parts, daily necessities and other goods, departed from Tuanjie Village of southwest China's Chongqing Municipality and headed for Duisburg of Germany.

Xi hosts 14th BRICS Summit, stresses importance of fostering high-quality partnership

According to Xinhua, Chinese President Xi Jinping chaired the 14th BRICS Summit on Thursday evening in Beijing via video link. South African President Cyril Ramaphosa, Brazilian President Jair Bolsonaro, Russian President Vladimir Putin and Indian Prime Minister Narendra Modi attended the Summit. President Xi delivered an important speech titled "Fostering High-quality Partnership and Embarking on a New Journey of BRICS Cooperation".

 What are experts talking about?

"The EU's ‘Strategic Autonomy’ Dilemma Comes to the Fore" by Huang Ying was published by the Institute of European Studies of Chinese Academy of Social Sciences in June. The crisis in Ukraine has sharply deteriorated the security and geostrategic situation in Europe, posing a cruel reality test for the EU's "strategic autonomy" process. The article points out that although the Russia-Ukraine conflict has plunged the EU into security, energy, food and refugee crises, it’s also an opportunity for the EU. The EU is taking the opportunity to break through the bottleneck in the process of building its "strategic autonomy" - to accelerate the process of militarization, while drawing in countries with the will to join the alliance.

The article published by the CSIS and written by Gerard DiPippo points out western governments imposed a series of financial, trade, and travel sanctions on Russia starting in late February. The authors point out that with almost four months of observations and data, Western policymakers are assessing the economic impact of the sanctions, weighing the risks of increasing pressure on Russia with new sanctions, and considering how the sanctions might plausibly contribute to an end to the conflict.

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.